download instant at www.easysemester.com
Strategic Management and Business Policy, 14e (Wheelen)
Chapter 2 Corporate Governance
1) The board of directors has an obligation to approve all decisions that might affect the long-run performance of the corporation.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
2) The term "corporate governance" refers to the relationship among the board of directors, top management, and the shareholders in determining the direction and performance of the corporation.
Answer: TRUE
Difficulty: Easy
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Ethical Understanding and Reasoning
3) The more active professional boards are being replaced by the board as a rubber stamp of the CEO.
Answer: FALSE
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Ethical Understanding and Reasoning
4) Succession planning for the board and top management team is one of the five responsibilities of the board of directors.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
5) Those directors who fail to act with due care and allow the corporation to be harmed may be held personally liable.
Answer: TRUE
Difficulty: Difficult
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Ethical Understanding and Reasoning
6) A 2011 McKinsey and Company survey found that less than 10 percent of a board's time is spent on strategy.
Answer: FALSE
Difficulty: Difficult
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
7) The lowest degree of involvement for a board of directors is the catalyst level of interaction.
Answer: FALSE
Difficulty: Easy
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
8) Generally, the smaller the corporation, the less active is its board of directors.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Reflective Thinking
9) Outside directors may be executives of other firms but are not employees of the board's corporation.
Answer: TRUE
Difficulty: Easy
Chapter Objective: Understand how the composition of a board can affect its operation
10) Population theory states that problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation.
Answer: FALSE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
11) Agency theory suggests that the majority of a board needs to be from outside the firm.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
12) Stewardship theory proposes insiders tend to identify with the corporation and its success.
Answer: TRUE
Difficulty: Easy
Chapter Objective: Understand how the composition of a board can affect its operation
13) A minority percentage of large corporations in the Americas and Europe may keep the firm's recently retired CEO on the board after retirement since there is a greater likelihood of a conflict of interest and less objectivity.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
AACSB: Reflective Thinking
14) The majority of outside directors are active or retired CEOs and COOs of other corporations.
Answer: TRUE
Difficulty: Easy
Chapter Objective: Understand how the composition of a board can affect its operation
15) Codetermination has been used in Germany since the 1950s, but has not been used in the United States.
Answer: FALSE
Difficulty: Easy
Chapter Objective: Understand how the composition of a board can affect its operation
16) A direct interlocking directorate occurs when two corporations have directors who also serve on the board of a third firm.
Answer: FALSE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
17) Interlocking directorates are a useful method for gaining both inside information about an uncertain environment and objective expertise about potential strategies and tactics. They are, however, increasingly frowned upon because of the possibility of collusion.
Answer: TRUE
Difficulty: Difficult
Chapter Objective: Understand how the composition of a board can affect its operation
AACSB: Ethical Understanding and Reasoning
18) While 97% of large U.S. corporations now use nominating committees to identify potential directors, this practice is not as common in Europe.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
19) The top criterion for selecting a good director in U.S. corporations is their willingness to challenge management when necessary.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
20) Approximately 68% of the top executives of the 100 largest U.S. companies hold the dual designation of chairman and CEO.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
21) The combined chair/CEO position is being increasingly criticized because of the potential for conflict of interest.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Understand how the composition of a board can affect its operation
AACSB: Ethical Understanding and Reasoning
22) A benefit of the increased disclosure requirements of the Sarbanes-Oxley Act has been more reliable corporate financial statements.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States
AACSB: Ethical Understanding and Reasoning
23) The SEC requires that the audit, nominating and compensation committees are staffed entirely by outside directors.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States
AACSB: Ethical Understanding and Reasoning
24) The role of the board of directors in the strategic management of the corporation is likely to be less active in the future.
Answer: FALSE
Difficulty: Easy
Chapter Objective: Discuss trends in corporate governance
25) Society increasingly expects corporate boards to balance the economic goal of profitability with the social needs of society.
Answer: TRUE
Difficulty: Easy
Chapter Objective: Discuss trends in corporate governance
AACSB: Ethical Understanding and Reasoning
26) Executive leadership is the directing of activities toward the accomplishment of corporate objectives.
Answer: TRUE
Difficulty: Easy
Chapter Objective: Explain how executive leadership is an important part of strategic management
27) Transformational leaders transform their organizations from market leaders in one industry to market leadership in another.
Answer: FALSE
Difficulty: Moderate
Chapter Objective: Explain how executive leadership is an important part of strategic management
28) The confidence levels of executive leaders may blind them to information that is contrary to a decided course of action; this may help to understand why overconfident CEOs are more likely to conduct mergers and acquisitions.
Answer: TRUE
Difficulty: Difficult
Chapter Objective: Explain how executive leadership is an important part of strategic management
AACSB: Application of Knowledge
29) Jeff Bezos, CEO of Amazon.com, uses the S team to engage in continuous strategic planning.
Answer: TRUE
Difficulty: Moderate
Chapter Objective: Explain how executive leadership is an important part of strategic management
AACSB: Application of Knowledge
30) Usually, the strategic planning staff is charged with supporting only top management in the strategic planning process.
Answer: FALSE
Difficulty: Moderate
Chapter Objective: Explain how executive leadership is an important part of strategic management
31) From the perspective of the public, the primary job of the board of directors is
A) to lend credence to the decisions of the executive committee.
B) dictated solely by legal requirements.
C) to act as representatives for public identification.
D) to closely monitor the actions of management.
E) insulated from legal judgments because management actually makes the decisions.
Answer: D
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
32) The relationship among the board of directors, top management, and shareholders is referred to as
A) corporate synergy.
B) corporate management.
C) corporate governance.
D) corporate strategy.
E) corporate responsibility.
Answer: C
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Ethical Understanding and Reasoning
33) The requirements of a board of directors vary significantly by country and by state; however, there is a developing consensus as to what the major responsibilities should be. Which of the following is NOT one of the responsibilities?
A) effective board leadership including the processes, makeup and output of the board
B) strategy of the organization
C) risk vs. initiative and the overall risk profile of the organization
D) becoming directly involved in managerial decisions
E) sustainability
Answer: D
Difficulty: Difficult
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
34) Which of the following statements is true regarding the board of directors?
A) The board is charged by law to act with due care.
B) If a director or the board as a whole fails to act with due care and, as a result, the corporation is in some way harmed, the careless director or directors can be held personally liable for the harm done.
C) Director liability insurance is often needed to attract people to become members of boards.
D) Directors must be aware of the needs of various constituent groups to balance all their interests.
E) all of the above
Answer: E
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
35) More than ______of outside directors surveyed said that they had been named as part of a lawsuit against the corporation.
A) 40%
B) 50%
C) 60%
D) 70%
E) 80%
Answer: A
Difficulty: Difficult
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
36) A careless director or directors can be held personally liable for harm done to the corporation if they failed to act with
A) codetermination.
B) figurehead role.
C) cumulative voting.
D) accountability.
E) due care.
Answer: E
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Ethical Understanding and Reasoning
37) Which of the following is NOT a task of the board of directors in strategic management?
A) to monitor
B) to implement
C) to influence
D) to initiate and determine
E) to evaluate
Answer: B
Difficulty: Easy
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
38) Catalyst-level board of directors typically
A) are less involved than active participation boards.
B) take leading roles in establishing and modifying the company mission, objectives, and strategy.
C) are involved in a limited degree of key decision making.
D) are held to a greater degree of legal responsibility.
E) experience more financial success than less involved boards.
Answer: B
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Analytical Thinking
39) A highly involved board does all of the following EXCEPT
A) tends to be very active.
B) provides advice when necessary.
C) keeps management alert.
D) takes their tasks of initiating and determining strategy very seriously.
E) manage the every day operations of the organization.
Answer: E
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Analytical Thinking
40) The ______boards typically never initiate or determine strategy unless a crisis occurs.
A) rubber stamp
B) active participation
C) catalyst
D) nominal participation
E) minimal review
Answer: A
Difficulty: Easy
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Analytical Thinking
41) According to the text, most publicly owned large corporations today tend to have boards with what degree of involvement in the strategic management process?
A) passive to minimal
B) minimal to nominal
C) rubber stamp type
D) nominal to active
E) active to catalyst
Answer: D
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
42) What percentage of public corporations have periodic board meetings devoted primarily to the review of overall strategy?
A) 24%
B) 34%
C) 44%
D) 64%
E) 74%
Answer: E
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
43) When a board of directors is involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management, the degree of involvement is referred to as
A) rubber stamp.
B) nominal participation.
C) active participation.
D) minimal review.
E) phantom.
Answer: B
Difficulty: Moderate
Chapter Objective: Describe the role and responsibilities of the board of directors in corporate governance
AACSB: Analytical Thinking
44) Outside directors are defined as
A) those individuals who scan the external environment.
B) individuals on the board who are not employed by the board's corporation.
C) those individuals with public relations responsibilities.
D) board members who are also officers or executives employed by the corporation.
E) individuals who organize and coordinate politically focused activities.
Answer: B
Difficulty: Easy
Chapter Objective: Understand how the composition of a board can affect its operation
45) According to ______theory, ______directors tend to identify with the corporation.
A) agency; inside
B) corporate governance; inside
C) stewardship; inside
D) corporate governance; affiliated
E) stewardship; outside
Answer: C
Difficulty: Difficult
Chapter Objective: Understand how the composition of a board can affect its operation
AACSB: Reflective Thinking
46) Surveys of large U.S. and Canadian corporations found outsiders make up what percentage of total board membership?